Cost Accounting Reconciliation of Cost and Financial Accounting
The word ‘Reconcile’ means to tally, conciliate, harmonize, bring together or equate. The term reconciliation applies to the reconciliation of the results of the business profit or loss as shown by the financial accounting records and the cost accounting records. When cost accounts and financial accounts are maintained separately, the profit shown by one set of books may not agree with that of the other set. In such a situation, it is necessary to reconcile the results (profit/loss) shown by two sets of books. Such reconciliation proves arithmetical accuracy of data, explains reasons for the difference in the two sets of books and affords reliability to them. Following are the main causes of difference between the results shown by the cost accounts and the financial accounts: 1. Estimates and Actuals: The cost can be computed either on actual or estimated basis. Since cost accounts are meant to function as a control device it will be appropriate to adopt estimated costin